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Another method to stimulate economic growth is to increase aggregate demand, which is accomplished through a series of tax cuts highlighted in the Ten Year Tax Plan. One example is increasing the income tax threshold of the middle tax bracket, from $80,000 to $87,000 which aims to increase the disposable income individuals, encouraging them to spend more. However, in reality, only 500,000 individuals will be affected saving a minuscule $6 a week. As this is an election Budget, the motives of this tax change can be seen as purely political, rather than economical. A more effective measure in the Ten Year Tax Plan is the reduction of company tax for small businesses, from 28.5% to 27.5%. By reducing the operating cost of firms, it allows them to spend and invest more, thus stimulating economic growth. Long-term, the Government estimates a 1% increase in GDP as a direct result of these tax cuts. Furthermore, by increasing the 'small business' threshold from $2m to $10m, it gives 90,000 firms access to these benefits. The government aims to gradually reduce company tax to 25% by 2026-27, in line with the OECD average. By allowing firms to invest and expand, it addresses another major goal of the Budget, to increase employment.
A major objective of fiscal policy is maintain internal balance, by creating jobs, keeping inflation within its target range and redistributing income in a fair manner. The introduction of the Youth Jobs PH internship programme plays a key role in the Governments objective of achieving 'Jobs and Growth'. The PH (Prepare-Trial-Hire) programme is part of an $840m Youth Employment Package that aims to train and educate young people to fit skill shortages in the workforce. A worrying study by the IMF in 2015 found Australia's non-accelerating inflation rate of unemployment (NAIRU) was 5.7%, which is the current unemployment rate. This means if unemployment were to fall below this natural rate, inflation will dramatically increase.